The company recently ventured into the micro LAP business as part of a product diversification strategy which would help it reduce the concentration of unsecured microfinance business.
The inorganic route would provide the company a stronger platform for micro LAP business.
“Muthoot Microfin is exploring a majority stake buyout which would help it acquire the know-how of this business. For lending against property, the company needs experts to do the valuation and assessment of the property title before lending,” a person close to the company said on condition of anonymity.
Muthoot Microfin CEO Sadaf Sayeed declined to comment.
Diversification Drive Co said to have held discussions with 2 firms to acquire a majority stake in bid to expand secured lending biz
Non-banking financial company-microfinance institutions (NBFC-MFIs) are pursuing a portfolio diversification strategy following the recent policy change by the Reserve Bank of India allowing them to increase their exposure to non-microfinance loans to 40% of their portfolio. Earlier, NBFC-MFIs were required to have at least 85% of their assets in microfinance loans, capping non-microfinance exposure at 15%.At present, Muthoot Microfin has about 85% of the total ₹13,078 crore portfolio is unsecured joint liability group (JLG) loans and the balance 15% in non-JLG loans.
“By the next financial year-end, we should be close to around 70-30 mix,” Sayeed said on an earnings call on February 10. “I think right now, everybody is recalibrating the model a little bit. and how the strategy has to be kind of deployed in terms of diversification.”
Of the assets under Muthoot Microfin’s management, micro loans account for ₹11,959 crore, individual loans for ₹1,097 crore and LAP for ₹22 crore. The lender aims to expand its book to ₹14,000 crore by the end of March and target about 20% growth in the next financial year.
Muthoot Microfin shares closed about 1.5% lower at 187.85 apiece on the BSE on Tuesday, when the benchmark index ended the session with a marginal gain of 0.2%.